Learn To Select Trading Window Frames (Part I)
You will need to learn technical analysis if you want to master currency trading. Technical analysis is most suited for forex trading. Forex markets are highly liquid and lend themselves very well to technical analysis methods. Charting shows us where price has been in the recent and distant past. Technical analysis is like a picture or window that helps us perceive the attitudes of the market participants as reflected in the price behavior of the market.
Technical analysis is based on the study of past price behavior. It uses charts and technical indicators. The basic purpose of technical analysis is to uncover and forecast market movements. Certain technical indicators give us clues as to where the price is heading based on the past price action.
Traders use technical analysis to find trends, support and resistance, trend reversal signals, potential price moves and the distance the price can move based on the measuring techniques.
Long term time frames do influence the short term time frames. How can we improve our odds of making a winning trade? When should we pull the trigger to enter a trade? The answer lies in the multiple time frames. By properly using and analyzing charts on different time frames you can make the odds in your favor.
But which time frame triggers actions first. How do we know which is the dominant time frame to follow. What is the shortest time frame a trader should choose against a longer term time frame?
Which time frame is the best to set your stops? Which time frame is used to best to establish your profit targets? We need to know which time frame is the best to pull the trigger to find out our window of opportunity.
Knowing what type of a trader you are is critical to your success as a trader. Are you entering a trade for scalping, day trading or swing trading? Will you look to expand your trading opportunity as a position trade to ride a long term trend? You should treat trading as a business.
Before making any trade, you need to decide which investment vehicle is the best to capture the risk to reward parameters and in the time frame you expect the market might take to reach those objectives.
You can also trade the currency futures or currency options as well as currency ETFs if you believe that you can achieve your profit objective with a high ROI with those instruments. It is not necessary that you only trade spot forex market.
You may think of yourself as a day trader or a long term trend follower. Only after that you will be able to determine which time frame to follow and then you can monitor shorter term time frames as well.
If you are trading for a living, then always take trading as a business. However, always remember you can keep on shifting between different trading styles depending on the market. As a long term trader you may need to use the short term day trading techniques to cover your trading expenses and make profits to pay your utility bills when the market is in a consolidation phase. Eventually you will encounter market phases that may dictate that you diversify your trading tactics.
